##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 20-F
 
  o
    
    Registration statement pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934
 or
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934For
the fiscal year ended December 31, 2010.
 or
 o
    
    Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934For the transition period from

to
 or
 o
    
    Shell company report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934Date of event requiring this shell
company report
 Commission file number: 031-34869
 Country Style Cooking Restaurant Chain Co., Ltd.
 
   
   
  
 
  
 
  
 Securities registered or to be registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange on Which RegisteredOrdinary shares, par value US$0.001 per share
    
    The New York Stock Exchange*
 
 *
    
    Not for trading, but only in connection with the listing on The New York Stock Exchange of
American depositary shares (ADSs). Currently, each ADS represents four ordinary shares. Securities registered or to be registered pursuant to Section 12(g) of the Act:
 None
 
 (Title of Class)
 Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
 None
 
 (Title of Class)
   o þ
 o þ
 þ o
 þ o
  o o þ
  U.S. GAAP
    
    þ
  Board
    
    oOther
    
    o
  Item 17
    
    oItem 18
    
    o
 o þ
  o o




---



##### 



TABLE OF CONTENTS
 INTRODUCTION
    
    
    4FORWARD-LOOKING STATEMENTS
    
    
    4PART I
    
    
    6Item 1.
    
    Identity of Directors, Senior Management and Advisers
    
    
    6Item 2.
    
    Offer Statistics and
Expected Timetable
    
    
    6Item 3.
    
    Key Information
    
    
    6Item 4.
    
    Information on the
Company
    
    
    34Item 4A.
    
    Unresolved Staff
Comments
    
    
    58Item 5.
    
    Operating and
Financial Review and Prospects
    
    
    58Item 6.
    
    Directors, Senior
Management and Employees
    
    
    77Item 7.
    
    Major Shareholders
and Related Party Transactions
    
    
    89Item 8.
    
    Financial
Information
    
    
    91Item 9.
    
    The Offer and
Listing
    
    
    92Item 10.
    
    Additional
Information
    
    
    93Item 11.
    
    Quantitative and
Qualitative Disclosures About Market Risk
    
    
    105Item 12.
    
    Description of
Securities Other than Equity Securities
    
    
    106PART II
    
    
    108Item 13.
    
    Defaults, Dividend
Arrearages and Delinquencies
    
    
    108Item 14.
    
    Material
Modifications to the Rights of Security Holders and Use of
Proceeds
    
    
    108Item 15.
    
    Controls and
Procedures
    
    
    108Item 16.
    

[Reserved]
    
    
    109Item 16A.
    
    Audit Committee
Financial Expert
    
    
    109Item 16B.
    
    Code of Ethics
    
    
    109Item 16C.
    
    Principal Accountant
Fees and Services
    
    
    109Item 16D.
    
    Exemptions from the
Listing Standards for Audit Committees
    
    
    110Item 16E.
    
    Purchases of Equity
Securities by the Issuer and Affiliated Purchasers
    
    
    110Item 16F.
    
    Change in
Registrants Certifying Accountant
    
    
    110Item 16G.
    
    Corporate
Governance
    
    
    110Item 17.
    
    Financial
Statements
    
    
    111Item 18.
    
    Financial
Statements
    
    
    111Item 19.
    
    Exhibits
    
    
    111SIGNATURES
    
    
    113EX-2.2EX-8.1EX-12.1EX-12.2EX-13.1EX-13.2EX-15.1EX-15.2EX-15.3




---



##### Table of Contents



INTRODUCTION
  
    
    China or PRC refers to the Peoples Republic of China, excluding Taiwan, Hong
Kong and Macau;
    
    CSC Cayman refers to Country Style Cooking Restaurant Chain Co., Ltd.;
    
    CSC China refers to Country Style Cooking (Chongqing) Investment Co., Ltd.;
    
    CSC Hong Kong refers to Country Style Cooking International Restaurant Chain
Group, Ltd.;
    
    we, us, our company, our and Country Style Cooking refer to CSC Cayman
and its subsidiaries;
    
    shares or ordinary shares refers to our ordinary shares, par value $0.001 per
share, and Series A preferred shares refers to our Series A convertible preferred
shares, par value $0.001 per share, which were automatically converted into ordinary
shares upon the completion of our companys initial public offering in September 2010;
    
    ADSs refers to our American depositary shares, each of which represents four
ordinary shares;
    
    U.S. GAAP refers to accounting principles generally accepted in the United
States;
    
    average table turnover per day refers to the total number of receipts provided by
our restaurants upon sales, divided by the product of the total number of tables at
these restaurants and the number of days such restaurants are open for business in a
given period;
    
    RMB or Renminbi refers to the legal currency of China; $, dollars, US$
and U.S. dollars refers to the legal currency of the United States; and
    
    all discrepancies in any table between the amounts identified as total amounts and
the sum of the amounts listed therein are due to rounding.
 
 FORWARD-LOOKING STATEMENTS
  4




---



##### Table of Contents




    
    our business and operating strategies and prospects;
    
    our expansion and capital expenditure plans;
    
    market acceptance of our food and services;
    
    our planned use of proceeds;
    
    our financial condition and results of operations;
    
    our ability to enhance and maintain our brand name;
    
    competition in the quick service restaurant sector;
    
    the industry regulatory environment as well as the industry outlook generally; and
    
    fluctuations in general economic and business conditions in China.
   5




---



##### Table of Contents



PART I
 Item 1.
    
    Identity of Directors, Senior Management and Advisers
  Item 2.
    
    Offer Statistics and Expected Timetable
  Item 3.
    
    Key Information
 A. Selected Financial Data
  6




---



##### Table of Contents



Year Ended December 31,2007
    
    2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    RMB
    
    $(In thousands, except shares, per share, ADS and per ADS data)Consolidated Statements of
Operations Data:Revenuerestaurant sales
    
    
    44,195
    
    
    
    231,463
    
    
    
    494,459
    
    
    
    745,939
    
    
    
    113,021Costs and expenses:Restaurant expenses:Food and paper
    
    
    21,810
    
    
    
    115,071
    
    
    
    239,357
    
    
    
    351,422
    
    
    
    53,246Restaurant wages and related
expenses (1)
    
    
    7,492
    
    
    
    33,076
    
    
    
    76,890
    
    
    
    119,052
    
    
    
    18,038Restaurant rent expenses
    
    
    3,275
    
    
    
    17,945
    
    
    
    38,546
    
    
    
    64,284
    
    
    
    9,740Restaurant utilities expenses
    
    
    3,771
    
    
    
    13,773
    
    
    
    31,073
    
    
    
    46,746
    
    
    
    7,083Pre-opening expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,906
    
    
    
    895Other restaurant operating
expenses
    
    
    2,381
    
    
    
    12,455
    
    
    
    28,774
    
    
    
    33,106
    
    
    
    5,016Selling, general and
administrative expenses
(1)
    
    
    38,168
    
    
    
    3,955
    
    
    
    13,360
    
    
    
    32,330
    
    
    
    4,898Depreciation
    
    
    968
    
    
    
    2,855
    
    
    
    10,999
    
    
    
    21,288
    
    
    
    3,225Impairment and other lease
charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,087
    
    
    
    316Total operating expenses
    
    
    77,865
    
    
    
    199,130
    
    
    
    438,999
    
    
    
    676,221
    
    
    
    102,457Income (loss) from operations
    
    
    (33,670
    )
    
    
    32,333
    
    
    
    55,460
    
    
    
    69,718
    
    
    
    10,564Interest income
    
    
    
    
    
    
    1,083
    
    
    
    758
    
    
    
    3,465
    
    
    
    525Foreign exchange gain (loss)
    
    
    
    
    
    
    (1,347
    )
    
    
    3
    
    
    
    (2,715
    )
    
    
    (411
    )Other income (loss)
    
    
    493
    
    
    
    (12
    )
    
    
    490
    
    
    
    6,893
    
    
    
    1,044Income (loss) before income
taxes
    
    
    (33,177
    )
    
    
    32,057
    
    
    
    56,711
    
    
    
    77,361
    
    
    
    11,722Income tax expenses
    
    
    (336
    )
    
    
    (5,440
    )
    
    
    (11,632
    )
    
    
    (14,551
    )
    
    
    (2,205
    )Net income (loss)
    
    
    (33,543
    )
    
    
    26,617
    
    
    
    45,079
    
    
    
    62,810
    
    
    
    9,517Dividend on Series A
convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    (3,946
    )
    
    
    
    
    
    
    Distribution to the founder
    
    
    (1,744
    )
    
    
    (2,436
    )
    
    
    (3,454
    )
    
    
    
    
    
    
    Net income (loss) attributable
to ordinary shareholders
    
    
    (35,287
    )
    
    
    24,181
    
    
    
    37,679
    
    
    
    62,810
    
    
    
    9,517Basic net income (loss) per
share
    
    
    (0.48
    )
    
    
    0.30
    
    
    
    0.47
    
    
    
    0.73
    
    
    
    0.11Basic net income (loss) per
ADS (2)
    
    
    (1.92
    )
    
    
    1.21
    
    
    
    1.88
    
    
    
    2.92
    
    
    
    0.44Diluted net income (loss) per
share
    
    
    (0.48
    )
    
    
    0.30
    
    
    
    0.47
    
    
    
    0.71
    
    
    
    0.11Diluted net income (loss) per
ADS (2)
    
    
    (1.92
    )
    
    
    1.21
    
    
    
    1.88
    
    
    
    2.84
    
    
    
    0.43Basic weighted average
ordinary shares outstanding
    
    
    56,000,000
    
    
    
    56,000,000
    
    
    
    56,000,000
    
    
    
    68,124,712
    
    
    
    68,124,712
 7




---



##### Table of Contents



Year Ended December 31,2007
    
    2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    RMB
    
    $(In thousands, except shares, per share, ADS and per ADS data)Diluted weighted average
ordinary shares outstanding
    
    
    80,000,000
    
    
    
    80,000,000
    
    
    
    80,000,000
    
    
    
    70,503,794
    
    
    
    70,503,794
 
 Notes:(1)
    
    Includes share-based compensation expenses of RMB5.7 million ($0.9 million) for the year
ended December 31, 2010.(2)
    
    Each ADS represents four ordinary shares.  As of December 31,2007
    
    2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    RMB
    
    $in thousandsCurrent Assets:Cash and cash equivalents
    
    
    59,573
    
    
    
    52,378
    
    
    
    70,695
    
    
    
    612,583
    
    
    
    92,816Total current assets
    
    
    67,427
    
    
    
    75,439
    
    
    
    105,913
    
    
    
    661,731
    
    
    
    100,262Total assets
    
    
    72,035
    
    
    
    130,909
    
    
    
    215,068
    
    
    
    869,803
    
    
    
    131,788Total current liabilities
    
    
    5,732
    
    
    
    38,686
    
    
    
    82,193
    
    
    
    90,419
    
    
    
    13,698Total liabilities
    
    
    5,732
    
    
    
    40,818
    
    
    
    87,301
    
    
    
    103,711
    
    
    
    15,712Mezzanine equity
    
    
    96,949
    
    
    
    96,949
    
    
    
    96,949
    
    
    
    
    
    
    
    Total equity (deficit)
    
    
    (30,646
    )
    
    
    (6,858
    )
    
    
    30,818
    
    
    
    766,092
    
    
    
    116,076Total liabilities, mezzanine
equity and equity (deficit)
    
    
    72,035
    
    
    
    130,909
    
    
    
    215,068
    
    
    
    869,803
    
    
    
    131,788
 Exchange Rate Information
   8




---



##### Table of Contents



Noon Buying RatePeriod
    
    Period End
    
    Average(1)
    
    Low
    
    High(RMB Per $1.00)2006
    
    
    7.8041
    
    
    
    7.9579
    
    
    
    8.0702
    
    
    
    7.80412007
    
    
    7.2946
    
    
    
    7.5806
    
    
    
    7.8127
    
    
    
    7.29462008
    
    
    6.8225
    
    
    
    6.9193
    
    
    
    7.2946
    
    
    
    6.78002009
    
    
    6.8259
    
    
    
    6.8295
    
    
    
    6.8470
    
    
    
    6.81762010
    
    
    6.6000
    
    
    
    6.7603
    
    
    
    6.8305
    
    
    
    6.6000October
    
    
    6.6705
    
    
    
    6.6675
    
    
    
    6.6912
    
    
    
    6.6397November
    
    
    6.6670
    
    
    
    6.6538
    
    
    
    6.6892
    
    
    
    6.6330December
    
    
    6.6000
    
    
    
    6.6497
    
    
    
    6.6745
    
    
    
    6.60002010January
    
    
    6.6017
    
    
    
    6.5964
    
    
    
    6.6364
    
    
    
    6.5809February
    
    
    6.5713
    
    
    
    6.5761
    
    
    
    6.5965
    
    
    
    6.5520March
    
    
    6.5483
    
    
    
    6.5645
    
    
    
    6.5743
    
    
    
    6.5483April (through April 15)
    
    
    6.5317
    
    
    
    6.5382
    
    
    
    6.5477
    
    
    
    6.5310
 
 Source: Federal Reserve Statistical Release(1)
    
    Annual averages were calculated by using the average of the exchange rates on the last day of
each month during the relevant year. Monthly averages are calculated by using the average of
the daily rates during the relevant month. B. Capitalization and Indebtedness
  C. Reasons for the Offer and Use of Proceeds
  D. Risk Factors
 Risks Relating to Our Industry and Business
 Our future growth depends on our ability to open and profitably operate new restaurants.
  9




---



##### Table of Contents



Our future growth also depends on our ability to increase existing restaurant sales.
  Our historical financial and operating results are not indicative of future performance; our
financial and operating results are difficult to forecast.
  Our results of operations may fluctuate significantly due to seasonality and other factors.
  10




---



##### Table of Contents



Our expansion into new markets may present increased risks.
  If we are unable to manage our growth effectively, we may not be able to capitalize on new
business opportunities and our business and financial results may be materially and adversely
affected.
  11




---



##### Table of Contents



Our business is affected by changes in consumer taste and discretionary spending.
  Our restaurants are susceptible to risks in relation to rental increases and fluctuations,
inflexible long-term lease agreements and unexpected land acquisitions, building closures or
demolitions.
    12




---



##### Table of Contents



Our business depends significantly on the market recognition of our (CHINESE GRAPHICS) CSC brand, and if
we are not able to maintain or enhance our brand recognition, our business, financial condition
and results of operations may be materially and adversely affected.
 
  We generate a majority of our revenues from Chongqing municipality and Sichuan Province in
China. Any event negatively affecting the consumer food services industry in these markets could
have a material adverse effect on our overall business and results of operations.
  13




---



##### Table of Contents



We face risks related to instances of food-borne illnesses, health epidemics and other
outbreaks.
   Our success depends on the continuing efforts of our senior management team and other key
personnel and our business may be harmed if we lose their services.
  14




---



##### Table of Contents



Events that disrupt the operations of any of our restaurants, such as fires, floods, earthquakes
or other natural or man-made disasters, may materially and adversely affect our business
operations.
  Reports of incidents of food tampering could materially damage our reputation and reduce our
restaurant sales.
  Increases in the cost of ingredients used in our restaurants may lead to declines in our margins
and operating results.
  15




---



##### Table of Contents



Our current restaurant locations may become unattractive, and attractive new restaurant
locations may not be available for a reasonable price, if at all.
   Our success depends on our ability to compete with our major competitors.
  16




---



##### Table of Contents



Failure to comply with government regulations relating to the consumer food services industry,
fire safety, food hygiene and environmental protection could materially and adversely affect our
business and operating results.
  17




---



##### Table of Contents



We depend on our dedicated and capable employees, and if we are not able to continue to hire,
train and retain qualified employees or if labor costs increase, our business and results of
operations could be materially and adversely affected.
  We have granted and will continue to grant restricted shares, stock options and other
share-based compensation, which may materially impact our results of operations.
  Our corporate actions are substantially controlled by our officers, directors and principal
shareholders and their affiliated entities.
  18




---



##### Table of Contents



We have limited insurance coverage.
  Our legal right to lease certain properties could be challenged by third parties.
   Failure to comply with lease registration and other compliance requirements under PRC law may
subject our lessors or us to fines or other penalties that may negatively affect our ability to
operate our restaurants.
  19




---



##### Table of Contents



We may need additional capital, and our ability to obtain additional capital is subject to
uncertainties.
  
    
    investors perception of, and demand for, securities of businesses in the consumer
food services industry;
    
    conditions of the U.S. and other capital markets in which we may seek to raise
funds;
    
    our future results of operations, financial condition and cash flows;
    
    PRC governmental regulation of foreign investment in the consumer food services
industry in China;
    
    economic, political and other conditions in China; and
    
    PRC governmental policies relating to foreign currency borrowings.
 20




---



##### Table of Contents



Risks Related to Doing Business in China
 Adverse changes in economic and political policies of the PRC government could have a material
adverse effect on the overall economic growth of China, which could adversely affect our
business.
  Uncertainties with respect to the PRC legal system could materially and adversely affect us.
   21




---



##### Table of Contents



If our preferential tax treatments become unavailable or if the calculation of our tax liability
is successfully challenged by the PRC tax authorities, our results of operations would be
materially and adversely affected.
  You may experience difficulties in effecting service of legal process, enforcing foreign
judgments or bringing original actions in China against us or our management named in the annual
report.
  22




---



##### Table of Contents



Governmental control of currency conversion may affect the value of your investment.
 SAFE
 PRC regulations relating to the establishment of offshore special purpose companies by PRC
residents may subject our PRC resident shareholders to personal liability and limit our ability
to inject capital into our PRC subsidiaries, limit our PRC subsidiaries ability to distribute
profits to us, or otherwise adversely affect us.
  23




---



##### Table of Contents



All participants of our existing share incentive plan who are PRC citizens are required to
register with SAFE, and the failure to so comply could subject us and such participants to
penalties.
 Stock Option Rules
 24




---



##### Table of Contents



Our current employment practices may be adversely impacted under the labor contract law of the
PRC.
  Fluctuations in exchange rates may result in foreign currency exchange losses and may have a
material adverse effect on your investment.
  25




---



##### Table of Contents



PRC regulation of loans and direct investment by offshore holding companies to PRC entities may
delay or prevent us from making loans or additional capital contributions to our PRC operating
subsidiaries, which could materially and adversely affect our liquidity and our ability to fund
and expand our business.
   26




---



##### Table of Contents



We rely principally on dividends and other distributions paid by our wholly owned operating
subsidiaries in China to fund any cash and financing requirements we may have, and any
limitation on the ability of our operating subsidiaries to pay dividends to us could have a
material adverse effect on our ability to borrow money or pay dividends to holders of our ADSs.
   The dividends we receive from our Chinese subsidiaries and our global income may be subject to
Chinese tax under the EIT Law, which would have a material adverse effect on our results of
operations; our foreign ADS holders will be subject to a Chinese withholding tax upon the
dividends payable by us and gains on the sale of ADSs or ordinary shares may be subject to taxes
under PRC tax laws, if we are classified as a Chinese resident enterprise.
  27




---



##### Table of Contents



Risks Related to Our ADSs
 The market price for our ADSs may be volatile.
  Substantial future sales or the expectation of substantial sales of our ADSs in the public
market could cause the price of our ADSs to decline.
  28




---



##### Table of Contents



If securities or industry analysts publish negative reports about our business, the price and
trading volume of our securities could decline.
  You may not have the same voting rights as the holders of our ordinary shares and may not
receive voting materials in time to be able to exercise your right to vote.
  29




---



##### Table of Contents



You may not be able to participate in rights offerings and may experience dilution of your
holdings as a result.
  You may be subject to limitations on transfer of your ADSs.
  Certain judgments obtained against us by our shareholders may not be enforceable.
  We are a Cayman Islands company and, because judicial precedent regarding the rights of
shareholders is more limited under Cayman Islands law than under U.S. law, you may have less
protection of your shareholder rights than you would under U.S. law.
  30




---



##### Table of Contents



Our articles of association contain anti-takeover provisions that could have a material adverse
effect on the rights of holders of our ordinary shares and ADSs.
  We incur increased costs as a result of being a public company.
  31




---



##### Table of Contents



If we fail to maintain an effective system of internal controls over financial reporting, we may
not be able to accurately report our financial results or prevent fraud.
     32




---



##### Table of Contents



We may be classified as a passive foreign investment company, or PFIC, which could result in
adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or ordinary shares.
     33




---



##### Table of Contents



Item 4.
    
    Information on the Company
 A. History and Development of the Company
      34




---



##### Table of Contents



B. Business Overview
  
  35




---



##### Table of Contents



36




---



##### Table of Contents



Industry Background
   Our Food
   Simple but Diversified Menu
  37




---



##### Table of Contents



Quality Ingredients
 Close Relationship with Suppliers.
  Careful Selection of Suppliers.
 38




---



##### Table of Contents



Close Monitoring of Suppliers.
 Distribution Arrangements.
 Proprietary Sauce Packages
  Product Development
   39




---



##### Table of Contents




    
    we gather monthly market information updates from head cooks in each of our restaurants,
including news and analysis of popular food trends, sales figures of any new products and
any new menu items being offered by competitors;
    
    we send monthly market information updates to our marketing department for further
study;
    
    our marketing department conducts focus group tests to gauge customer taste preferences
and passes the results onto our product development team;
    
    our product development team studies potential new menu items and submits new menu item
development plans to our product development committee, including our chief executive
officer, for review and approval;
    
    we determine the recipe for a new menu item and compile a standardized list setting
forth the quality of the seasonings, spices and ingredients needed for the menu item;
    
    our purchase department appoints the appropriate suppliers for the item, while our
accounting department calculates basic ingredients costs and our marketing department
designs the appropriate container for the item; and
    
    our product development committee, including our chief executive officer, approves the
new menu item.
 On-site Food Preparation
  40




---



##### Table of Contents



Quality Monitoring
  Our Services and Customer Experience
 Our Services
   Customer Experience
  41




---



##### Table of Contents



Our Restaurants
 CSC Restaurants
 
   Number ofRestaurantsChongqing Municipality
    
    
    69Sichuan Province
    
    
    45Shaanxi Province
    
    
    8Hunan Province
    
    
    4Shanghai Municipality
    
    
    3Hubei Province
    
    
    1Guizhou Province
    
    
    1Total
    
    
    131
   42




---



##### Table of Contents



Restaurant Locations
    Planning and site identification.
  
    
    General market criteria.General market criteria include local average disposable
income per household, concentration of competitors, and other economic factors. Our
experience has proven that locations in our current geographic markets generally meet our
general market criteria for the operating of our restaurants. We have identified certain
cities meeting our general market criteria that we believe generally have the
potential for sustainable economic growth and the ability to support multiple restaurants
for us. We refer to these cities as our key target cities.
 43




---



##### Table of Contents




    
    Specific location criteria.Specific location criteria include rental price and
proximity to major office buildings and shopping centers, universities, convention and
exhibition centers and transportation hubs. We also consider automobile and foot traffic
flow patterns. In addition, we generally open restaurants in storefronts visible from the
street in urban areas. So far we have mostly succeeded in choosing restaurant locations
that provide sufficient customer flow to make our restaurants profitable.
  Lease negotiation.
 Material rental terms.
 Pre-opening activities.
 Restaurant Design
  44




---



##### Table of Contents



Restaurant Management
  Headquarters management.
 Regional management.
 Restaurant-level management.
 Marketing and Promotion
  45




---



##### Table of Contents



www.csc100.com
   
    
    China Up and Comers 2009 award granted in 2009 by Forbesmagazine;
    
    Recommended Delicious Cuisine Brand award granted in 2009 by the Chongqing Commercial
Press;and
    
    Ten Most Popular Brand award granted in 2007 by the Chongqing Morning Post.
 Forbes Chongqing Morning Post,
 Competition
  46




---



##### Table of Contents




    
    quality and taste of our food offerings;
    
    affordability of our food offerings;
    
    clean and pleasant dining atmosphere;
    
    overall customer satisfaction;
    
    broad, loyal customer base;
    
    brand recognition;
    
    ability to attract and retain qualified employees; and
    
    efficient, highly scalable business model.
 
 Technology
  47




---



##### Table of Contents



Intellectual Property
 
 
 Insurance
  PRC Regulation
  48




---



##### Table of Contents



Regulations on the Consumer Food Services Industry
  Regulations on the Food Safety and Licensing Requirements for Consumer Food Services
   
    
    having adequate places for treating raw materials and food processing, packaging and
storage; keeping the environment of the said places tidy and clean, and ensuring that they
are at a prescribed distance from toxic and hazardous sites and other pollution sources;
    
    having adequate production or business operation equipment or facilities and having the
adequate equipment or facilities for disinfection, changing clothes, toilet, day-lighting,
illumination, ventilation, anti-corrosion, anti-dust, anti-fly, rat proof, mothproof,
washing, sewage discharge, and storage of garbage and waste;
    
    having professional food safety technicians and managerial personnel, and rules and
regulations to ensure food safety;
    
    having reasonable equipment layout and technical flowchart to prevent cross pollution
between the food to be processed and ready-to-eat food and between raw materials and
finished products, and to prevent the food from coming into contact with toxic substances
or unclean articles;
    
    ensuring that the cutlery, drinking sets and containers for ready-to-eat food are washed
clean or disinfected prior to use, the kitchenware and utensils are washed clean after use
and kept clean;
    
    ensuring that the containers, utensils and equipment for storing, transporting, loading
and unloading food are safe, are kept clean and meet other special requirements;
 49




---



##### Table of Contents




    
    ensuring that the persons engaging in the production of food or related business
operations shall keep personal hygiene, wash their hands clean and wear clean clothes and
hats during the process of food production or related business operations;
    
    using water which conforms to the national hygiene standards for drinking water; and
    
    using detergent or disinfectant which are safe and not harmful to the human body.
      50




---



##### Table of Contents



Regulations on Fire Prevention
     51




---



##### Table of Contents



Regulations on Environmental Protection
     52




---



##### Table of Contents



Foreign Currency Exchange
     53




---



##### Table of Contents



SAFE Circular No. 75
  Regulations on Employee Stock Options Plans
 Stock Option Rules
  54




---



##### Table of Contents



Legal Restrictions on Dividend Distributions
  55




---



##### Table of Contents



56




---



##### Table of Contents



C. Organizational Structure
  
  D. Property, Plants and Equipment
 Facilities
  Owned
    
    LeasedRestaurant
    
    Office
    
    RestaurantOffice Space
    
    Space
    
    Space
    
    Space(square meters)Chongqing Municipality
    
    
    1,344
    
    
    
    3,396
    
    
    
    140
    
    
    
    39,083Sichuan Province
    
    
    
    
    
    
    650
    
    
    
    504
    
    
    
    22,249Shaanxi Province
    
    
    
    
    
    
    
    
    
    
    120
    
    
    
    3,965Shanghai Municipality
    
    
    
    
    
    
    
    
    
    
    75
    
    
    
    1,252Hunan Province
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,844Hubei Province
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500Guizhou Province
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    756Total
    
    
    1,344
    
    
    
    4,046
    
    
    
    839
    
    
    
    69,649
  57




---



##### Table of Contents



Item 4A.
    
    Unresolved Staff Comments
  Item 5.
    
    Operating and Financial Review and Prospects
 You should read the following discussion and analysis of our financial condition and results
of operations in conjunction with the consolidated financial statements and the related notes
included elsewhere in this annual report. This discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results and the timing of selected events could differ
materially from those anticipated in these forward-looking statements as a result of various
factors, including those set forth under  Item 3.D. Key InformationRisk Factors  and elsewhere
in this annual report.
 A. Operating Results
 Overview
  Key Factors Affecting our Results of Operations
  Number of restaurants in operation
  58




---



##### Table of Contents



As of December 31,2008
    
    2009
    
    2010Number of Restaurants:Chongqing Municipality
    
    
    31
    
    
    
    48
    
    
    
    69Sichuan Province
    
    
    8
    
    
    
    22
    
    
    
    45Other Regions
    
    
    4
    
    
    
    11
    
    
    
    17Total
    
    
    43
    
    
    
    81
    
    
    
    131
  Comparable restaurant sales
   For the year ended December 31,
    
    For the year ended December 31,2008
    
    2009
    
    2009
    
    2010Number of comparable restaurants
    
    
    9
    
    
    
    9
    
    
    
    43
    
    
    
    43Revenues for comparable
restaurants (in RMB thousands)
    
    
    79,422
    
    
    
    87,795
    
    
    
    369,429
    
    
    
    394,719Percentage increase during
comparable periods
    
    10.5%
    
    6.8%
  Food and paper costs
  59




---



##### Table of Contents



For the Year Ended December 312008
    
    2009
    
    2010Cost
    
    % of revenue
    
    Cost
    
    % of revenue
    
    Cost
    
    % of revenue(In thousands of RMB, except percentages)Food and beverage
    
    
    106,761
    
    
    
    46.1
    %
    
    
    221,227
    
    
    
    44.7
    %
    
    
    329,728
    
    
    
    44.2
    %Paper
    
    
    8,310
    
    
    
    3.6
    %
    
    
    18,130
    
    
    
    3.7
    %
    
    
    21,694
    
    
    
    2.9
    %Total Food and Paper
    
    
    115,071
    
    
    
    49.7
    %
    
    
    239,357
    
    
    
    48.4
    %
    
    
    351,422
    
    
    
    47.1
    %
  Restaurant wages and related expenses
   Rental expenses
  60




---



##### Table of Contents



Critical Accounting Policies and Estimates
   Lease Accounting
  61




---



##### Table of Contents



Long-lived Assets
   Goodwill Impairment
  62




---



##### Table of Contents



Share-Based Compensation
      63




---



##### Table of Contents




    
    no material changes in the existing political, legal, fiscal and economic conditions in
China;
 
    
    no major changes in tax law in China or the tax rates applicable to our subsidiaries in
China;
 
    
    no material changes in the exchange rates and interest rates from the presently
prevailing rates;
 
    
    availability of finance not a constraint on our future growth;
 
    
    our ability to retain competent management, key personnel and technical staff to
support our ongoing operations; and
 
    
    no material deviation in market conditions from economic forecasts.
   Income Taxes
  64




---



##### Table of Contents



Results of Operations
  For Year Ended December 31,2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    $(In thousands)Revenuerestaurant sales
    
    
    231,463
    
    
    
    494,459
    
    
    
    745,939
    
    
    
    113,021
 65




---



##### Table of Contents



For Year Ended December 31,2008
    
    2009
    
    2010RMB
    
    RMB
    
    RMB
    
    $(In thousands)Costs and expenses:Restaurant expenses:Food and paper
    
    
    115,071
    
    
    
    239,357
    
    
    
    351,422
    
    
    
    53,246Restaurant wages and related
expenses
    
    
    33,076
    
    
    
    76,890
    
    
    
    119,052
    
    
    
    18,038Restaurant rent expenses
    
    
    17,945
    
    
    
    38,546
    
    
    
    64,284
    
    
    
    9,740Restaurant utilities expenses
    
    
    13,773
    
    
    
    31,073
    
    
    
    46,746
    
    
    
    7,083Pre opening expenses
    
    
    
    
    
    
    
    
    
    
    5,906
    
    
    
    895Other restaurant operating
expenses
    
    
    12,455
    
    
    
    28,774
    
    
    
    33,106
    
    
    
    5,016Selling, general and
administrative expenses
    
    
    3,955
    
    
    
    13,360
    
    
    
    32,330
    
    
    
    4,898Depreciation
    
    
    2,855
    
    
    
    10,999
    
    
    
    21,288
    
    
    
    3,225Impairment and other lease
charges
    
    
    
    
    
    
    
    
    
    
    2,087
    
    
    
    316Total operating expenses
    
    
    199,130
    
    
    
    438,999
    
    
    
    676,221
    
    
    
    102,457Income from operations
    
    
    32,333
    
    
    
    55,460
    
    
    
    69,718
    
    
    
    10,564Interest income
    
    
    1,083
    
    
    
    758
    
    
    
    3,465
    
    
    
    525Foreign exchange gain (loss)
    
    
    (1,347
    )
    
    
    3
    
    
    
    (2,715
    )
    
    
    (411
    )Other income (loss)
    
    
    (12
    )
    
    
    490
    
    
    
    6,893
    
    
    
    1,044Income before income taxes
    
    
    32,057
    
    
    
    56,711
    
    
    
    77,361
    
    
    
    11,722Income tax expenses
    
    
    (5,440
    )
    
    
    (11,632
    )
    
    
    (14,551
    )
    
    
    (2,205
    )Net income
    
    
    26,617
    
    
    
    45,079
    
    
    
    62,810
    
    
    
    9,517
 Results of Operations
 Year Ended December 31, 2010 Compared to Year Ended December 31, 2009
 Revenues
  
    
    an RMB24.2 million ($3.7 million) increase in revenues contributed by 43 restaurants
opened prior to December 31, 2008;
 
    
    an RMB119.4 million ($18.1 million) increase in revenues contributed by 38 restaurants
added during 2009; and
 
    
    an RMB107.8 million ($16.3 million) in revenues contributed by 50 restaurants added in
2010.
  66




---



##### Table of Contents



Food and paper
  Restaurant wages and related expenses
  Restaurant rental expenses
  Restaurant utility expenses
  Pre-opening expenses
  67




---



##### Table of Contents



Other restaurant operating expenses
  Selling, general and administrative expenses
  Depreciation
  Impairment and other lease charges
  Income tax expenses
  68




---



##### Table of Contents



Year Ended December 31, 2009 Compared to Year Ended December 31, 2008
 Revenues
  
    
    an RMB8.4 million increase in revenues contributed by 9 restaurants opened prior to
December 31, 2007;
 
    
    an RMB130.2 million increase in revenues contributed by 34 restaurants added during
2008; and
 
    
    an RMB124.4 million in revenues contributed by 38 new restaurants added during 2009.
  Food and paper
  Restaurant wages and related expenses
  69




---



##### Table of Contents



Restaurant rental expenses
  Restaurant utility expenses
  Other restaurant operating expenses
  Selling, general and administrative expenses
  Depreciation
  70




---



##### Table of Contents



Income tax expenses
  Net income
  Inflation
  Recent Accounting Pronouncements
  71




---



##### Table of Contents



72




---



##### Table of Contents



B. Liquidity and Capital Resources
 Cash Flows and Working Capital
   For the Year Ended December 31,2008
    
    2009
    
    2010(In thousands of RMB)Net cash provided by operating activities
    
    
    39,539
    
    
    
    72,169
    
    
    
    89,798Net cash used in investing activities
    
    
    (43,904
    )
    
    
    (50,395
    )
    
    
    (116,792
    )Net cash used in financing activities
    
    
    (2,436
    )
    
    
    (3,454
    )
    
    
    571,654Effect of exchange rate on cash and cash
equivalents
    
    
    (394
    )
    
    
    (3
    )
    
    
    (2,772
    )Net increase (decrease) in cash and cash
equivalents
    
    
    (7,195
    )
    
    
    18,317
    
    
    
    541,888Cash and cash equivalents at beginning
of the period
    
    
    59,573
    
    
    
    52,378
    
    
    
    70,695Cash and cash equivalents at end of the
period
    
    
    52,378
    
    
    
    70,695
    
    
    
    612,583
 73




---



##### Table of Contents



For the Year Ended December 31,2008
    
    2009
    
    2010(In thousands of RMB)Supplemental
disclosure of cash flow information:Payable for purchase of properties and
equipment
    
    
    3,911
    
    
    
    13,490
    
    
    
    12,317Income tax paid, net
    
    
    1,892
    
    
    
    9,264
    
    
    
    17,762Payable for offering expenses
    
    
    
    
    
    
    
    
    
    
    891
 Operating Activities
    74




---



##### Table of Contents



Investing Activities
    Financing Activities
  Capital Expenditures
  75




---



##### Table of Contents



C. Research and Development
  D. Trend Information
  E. Off-Balance Sheet Arrangements
  F. Tabular Disclosure of Contractual Obligations
  Payment Due by December 31,Total
    
    2011
    
    2012
    
    2013
    
    2014
    
    2015
    
    Thereafter(In thousands of RMB)Operating lease
obligations
    
    
    430,455
    
    
    
    70,319
    
    
    
    68,222
    
    
    
    64,228
    
    
    
    60,302
    
    
    
    52,851
    
    
    
    114,533
 G. Safe Harbor
  76




---



##### Table of Contents



Item 6.
    
    Directors, Senior Management and Employees
 A. Directors and Senior Management
  Directors and Executive Officers
    
    Age
    
    Position/TitleHong Li
    
    
    43
    
    
    Chairman of the Board of Directors and Chief Executive OfficerXingqiang Zhang
    
    
    45
    
    
    DirectorTim T. Gong
    
    
    47
    
    
    DirectorSteve Yue Ji
    
    
    39
    
    
    DirectorChao Sun
    
    
    34
    
    
    Director, Chief Operating OfficerLi-Lan Cheng
    
    
    46
    
    
    Independent DirectorMay Wu
    
    
    43
    
    
    Independent DirectorCaimin Zhong
    
    
    42
    
    
    Independent DirectorRoy Shengwen Rong
    
    
    42
    
    
    Chief Financial OfficerShengshun Li
    
    
    34
    
    
    Vice President for Corporate Development & LogisticsCheng Xiao
    
    
    36
    
    
    Vice President for Product Development
 Hong Li
 Xingqiang Zhang
 77




---



##### Table of Contents



Tim T. Gong
 Steve Yue Ji
 Chao Sun
 Li-Lan Cheng
 May Wu
 78




---



##### Table of Contents



Caimin Zhong
 Roy Shengwen Rong
 Shengshun Li
 Cheng Xiao
 79




---



##### Table of Contents



B. Compensation
  Share Incentive Plan
   Plan Administration.
 Award Agreement.
 Exercise Price.
 Eligibility.
 80




---



##### Table of Contents



Term of the Options.
 Vesting Schedule.
 Transfer Restrictions.
 Corporate Transactions.
 Amendment and Termination of the Plan.
 Early Exercise.
 81




---



##### Table of Contents



Ordinary Shares
    
    RestrictedName
    
    Underlying Options
    
    Shares
    
    Exercise Price
    
    Date of GrantLi-Lan Cheng
    
    
    *
    
    
    
    
    
    
    $
    3.08
    
    
    July 30, 2010May Wu
    
    
    *
    
    
    
    
    
    
    $
    4.13
    
    
    September 27, 2010Caimin Zhong
    
    
    *
    
    
    
    
    
    
    $
    4.13
    
    
    September 27, 2010Roy Shengwen Rong
    
    
    *
    
    
    
    
    
    
    $
    2.50
    
    
    May 20, 2010Roy Shengwen Rong
    
    
    
    
    
    
    *
    
    
    
    
    
    
    May 20, 2010Shengshun Li
    
    
    *
    
    
    
    
    
    
    $
    1.00
    
    
    January 1, 2010Shengshun Li
    
    
    *
    
    
    
    
    
    
    $
    5.38
    
    
    January 25, 2011Shengshun Li
    
    
    
    
    
    
    *
    
    
    
    
    
    
    February 25, 2011Cheng Xiao
    
    
    *
    
    
    
    
    
    
    $
    1.00
    
    
    January 1, 2010Chao Sun
    
    
    *
    
    
    
    
    
    
    $
    1.00
    
    
    January 1, 2010Chao Sun
    
    
    *
    
    
    
    
    
    
    $
    5.38
    
    
    January 25, 2011Other individuals
as a group
    
    
    3,618,000
    
    
    
    
    
    
    $
    1.00
    
    
    January 1, July 9, andAugust 23, 2010Other individuals
as a group
    
    
    745,000
    
    
    
    
    
    
    $
    5.38
    
    
    January 25, 2011Other individuals
as a group
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    February 24, 2011Total
    
    
    5,320,000
    
    
    
    304,000
 C. Board Practices
 Composition of Board of Directors
  82




---



##### Table of Contents



Code of Business Conduct and Ethics
  Duties of Directors
   
    
    convening shareholders annual general meetings and reporting its work to shareholders
at such meetings;
    
    declaring dividends and distributions;
    
    appointing officers and determining the term of office of officers;
    
    subject to our Memorandum and Articles of Association, exercising the borrowing powers
of our company and mortgaging the property of our company; and
    
    approving the transfer of shares of our company, including
the registering of such shares in our share register.
 Terms of Directors and Executive Officers
  83




---



##### Table of Contents



Committees of the Board of Directors
 Audit Committee
  
    
    selecting our independent auditors and pre-approving all auditing and non-auditing
services permitted to be performed by our independent auditors;
    
    reviewing with our independent auditors any audit problems or difficulties and
managements response to such audit problems or difficulties;
    
    reviewing and approving all proposed related party transactions, as defined in Item 404
of Regulation S-K under the Securities Act;
    
    discussing the annual audited financial statements with management and our independent
auditors;
    
    reviewing major issues as to the adequacy of our internal controls and any special
audit steps adopted in light of material control deficiencies;
    
    annually reviewing and reassessing the adequacy of our audit committee charter;
    
    such other matters that are specifically delegated to our audit committee by our board
of directors from time to time;
    
    meeting separately and periodically with management and our internal and independent
auditors; and
    
    reporting regularly to the full board of directors.
 84




---



##### Table of Contents



Compensation Committee
  
    
    approving and overseeing the compensation package for our executive officers;
    
    reviewing and making recommendations to the board of directors with respect to the
compensation of our directors;
    
    reviewing and approving corporate goals and objectives relevant to the compensation of
our chief executive officer, evaluating the performance of our chief executive officer in
light of those goals and objectives, and setting the compensation level of our chief
executive officer based on this evaluation; and
    
    reviewing periodically and making recommendations to the board of directors regarding
any long-term incentive compensation or equity plans, programs or similar arrangements,
annual bonuses, employee pension and welfare benefit plans.
 Corporate Governance and Nominating Committee
  
    
    identifying and recommending to the board nominees for election or re-election to the
board of directors, or for appointment to fill any vacancy;
    
    reviewing annually with the board the current composition of the board of directors in
light of the characteristics of independence, age, skills, experience and availability of
service to us;
 85




---



##### Table of Contents




    
    identifying and recommending to the board the directors to serve as members of the
committees of the board of directors;
    
    advising the board of directors periodically with respect to significant developments
in the law and practice of corporate governance as well as our compliance with applicable
laws and regulations, and making recommendations to the board on all matters of corporate
governance and on any corrective action to be taken; and
    
    monitoring compliance with our code of business conduct and ethics, including reviewing
the adequacy and effectiveness of our procedures to ensure proper compliance.
 Interested Transactions
  Remuneration and Borrowing
  Qualification
  Employment Agreements
  86




---



##### Table of Contents



D. Employees
  Number ofTypes of Employees
    
    EmployeesManagement and Corporate-level Staff
    
    
    498Cooks
    
    
    1,101Restaurant Staff
    
    
    3,857Total
    
    
    5,456
    (1)
 
 (1)
    
    Includes 4,958 employees that are hired through, and maintain employment contracts with a
third-party human resource service provider.   87




---



##### Table of Contents



E. Share Ownership
  
    
    each of our directors and executive officers; and
    
    each person known to us to own beneficially more than 5% of our ordinary shares.
   Ordinary Shares Beneficially OwnedNumber
    
    %Directors and Executive Officers:Hong Li (1)
    
    
    53,200,000
    
    
    
    51.41Xingqiang Zhang (1)
    
    
    53,200,000
    
    
    
    51.41Tim T. Gong (2)
    
    
    12,000,000
    
    
    
    11.60Steven Yue Ji (3)
    
    
    12,000,000
    
    
    
    11.60Chao Sun
    
    
    *
    
    
    
    *Li-Lan Cheng
    
    
    
    
    
    
    May Wu
    
    
    
    
    
    
    Caimin Zhong
    
    
    
    
    
    
    Roy Shengwen Rong (4)
    
    
    *
    
    
    
    *Shengshun Li
    
    
    *
    
    
    
    *Cheng Xiao
    
    
    *
    
    
    
    *All directors and executive
officers as a group
    
    
    77,353,750
    
    
    
    74.75Principal Shareholders:Regal Fair Holdings Limited (1)
    
    
    53,200,000
    
    
    
    51.41Sequoia Capital China II, L.P. and
affiliated funds (3)
    
    
    12,000,000
    
    
    
    11.60SIG China Investments One, Ltd. (2)
    
    
    12,000,000
    
    
    
    11.60
 
 *
    
    Less than 1%.(1)
    
    Consists of 53,200,000 ordinary shares held by Regal Fair Holdings Limited, a British Virgin
Islands company. Regal Fair Holdings Limited is jointly owned by Ms. Li and Mr. Zhang and Ms.
Li and 88




---



##### Table of Contents



Mr. Zhang share voting and dispositive power over the shares held by Regal Fair
Holdings Limited. The registered address of Regal Fair Holdings Limited is Portcullis TrustNet
Chambers, P.O. Box 3444, Road Town, Tortola, British Virgin Islands. Ms. Li and Mr. Zhang are
husband and wife. The business address for Ms. Li and Mr. Zhang is 18-1 Guojishangwu Center,
178 Zhonghua Road, Yuzhong District, Chongqing, Peoples Republic of China.(2)
    
    Consists of ordinary shares issuable upon conversion of 12,000,000 Series A preferred shares
held by SIG China Investments One Ltd. SIG Asia Investment, LLLP, the authorized agent of SIG
China Investments One, Ltd., has the discretionary authority to vote and dispose of the shares
held by SIG China Investments One, Ltd. Mr. Arthur Dantchik, in his capacity as president of
SIG Asia Investment, LLLP, may also be deemed as having investment discretion and voting power
over the shares held by SIG China Investments One, Ltd. Messrs. Dantchik and Gong each
disclaims beneficial ownership with respect to the shares owned by SIG China Investments One
Ltd. except to the extent of his pecuniary interest therein. The business address for Mr. Gong
and SIG China Investments One Ltd. is c/o SIG Asia Investment, LLLP, 101 California Street
Suite 3250, San Francisco, CA 94111, U.S.A.(3)
    
    Consists of ordinary shares issuable upon conversion of (i) 10,059,600 Series A preferred
shares held by Sequoia Capital China II, L.P., (ii) 250,800 Series A preferred shares held by
Sequoia Capital China Partners Fund II, L.P., and (iii) 1,689,600 Series A preferred shares
held by Sequoia Capital China Principals Fund II, L.P. Sequoia Capital China II, L.P., Sequoia
Capital China Partners Fund II, L.P. and Sequoia Capital China Principals Fund II. L.P are
managed by Sequoia Capital China Advisors Limited, a company incorporated in the Cayman
Islands. The general partner of Sequoia Capital China II, L.P., Sequoia Capital China Partners
Fund II, L.P. and Sequoia Capital China Principals Fund II. L.P. is Sequoia Capital China
Management II, L.P., whose general partner is SC China Holding Limited, a company incorporated
in the Cayman Islands. SC China Holding Limited is wholly owned by Max Wealth Enterprises
Limited, a company wholly owned by Neil Nanpeng Shen. Mr. Ji is a managing director of Sequoia
Capital China. Messrs. Shen and Ji each disclaims beneficial ownership with respect to the
shares held by Sequoia Capital China II, L.P., Sequoia Capital China Partners Fund II, L.P.
and Sequoia Capital China Principals Fund II. L.P. except to the extent of his pecuniary
interest therein. The business address of Sequoia Capital China II, L.P., Sequoia Capital
China Partners Fund II, L.P. and Sequoia Capital China Principals Fund II. L.P. is Suite 2215,
Two Pacific Place, 88 Queensway, Hong Kong. The business address of Mr. Ji is Room 4603, Plaza
66, Tower 2, 1366 Nanjing West Road, Shanghai, China.(4)
    
    The business address for Messrs. Sun, Rong, Li and Xiao is 18-1 Guojishangwu Center, 178
Zhonghua Road, Yuzhong District, Chongqing, Peoples Republic of China.  Item 7.
    
    Major Shareholders and Related Party Transactions
 A. Major Shareholders
  B. Related Party Transactions
 Transactions with Certain Directors, Shareholders, Affiliates and Key Management Personnel
  89




---



##### Table of Contents



Share Incentives
 Option Grants.
 90




---



##### Table of Contents



Private Placement
  C. Interests of Experts and Counsel
  Item 8.
    
    Financial Information
 A. Consolidated Statements and Other Financial Information
  Legal Proceedings
  Dividend Policy
   91




---



##### Table of Contents



B. Significant Changes
  Item 9.
    
    The Offer and Listing
 A. Offering and Listing Details
  B. Plan of Distribution
  C. Markets
  92




---



##### Table of Contents



Trading PriceHigh
    
    LowUS$
    
    US$Annual High and LowFiscal Year 2010
    
    $
    34.96
    
    
    $
    21.76Quarterly Highs and LowsFourth Fiscal Quarter of 2010
    
    $
    34.96
    
    
    $
    21.76First Fiscal of 2011
    
    $
    24.97
    
    
    $
    15.97Monthly Highs and LowsOctober 2010
    
    $
    34.96
    
    
    $
    25.75November 2010
    
    $
    31.40
    
    
    $
    21.97December 2010
    
    $
    26.70
    
    
    $
    21.76January 2011
    
    $
    24.97
    
    
    $
    21.51February 2011
    
    $
    24.13
    
    
    $
    21.28March 2011
    
    $
    21.33
    
    
    $
    15.97April 2011 (through April 19 2011)
    
    $
    17.99
    
    
    $
    16.50
 D. Selling Shareholders
  E. Dilution
  F. Expenses of the Issue
  Item 10.
    
    Additional Information
 A. Share Capital
  B. Memorandum and Articles of Association
   Registered Office and Objects
 93




---



##### Table of Contents



Board of Directors
  Ordinary Shares
 General
  Dividend Rights
  Voting Rights
    94




---



##### Table of Contents



Transfer of Shares
    Liquidation
  95




---



##### Table of Contents



Redemption of Shares
  Variations of Rights of Shares
  Inspection of Books and Records
  C. Material Contracts
  D. Exchange Controls
  E. Taxation
  Cayman Islands
  96




---



##### Table of Contents



Hong Kong
  PRC
     97




---



##### Table of Contents



Material United States Federal Income Tax Considerations
  General
  98




---



##### Table of Contents



Passive Foreign Investment Company Considerations
    99




---



##### Table of Contents



Dividends
    100




---



##### Table of Contents



Sale or Other Disposition of ADSs or Ordinary Shares
  Passive Foreign Investment Company Rules
  101




---



##### Table of Contents




    
    excess distribution and/or gain will be allocated ratably over the U.S. Holders holding
period for our ADSs or ordinary shares;
 
    
    amount allocated to the current taxable year and any taxable years in the U.S. Holders
holding period prior to the first taxable year in which we are classified as a PFIC, or
pre-PFIC year, will be taxable as ordinary income;
 
    
    amount allocated to each prior taxable year, other than the current taxable year or a
pre-PFIC year, will be subject to tax at the highest tax rate in effect applicable to you
for that year; and
 
    
    interest charge generally applicable to underpayments of tax will be imposed on the tax
attributable to each prior taxable year, other than the current taxable year or a pre-PFIC
year.
   102




---



##### Table of Contents



Information Reporting and Backup Withholding
   103




---



##### Table of Contents



F. Dividends and Paying Agents
  G. Statement by Experts
  H. Documents on Display
    104




---



##### Table of Contents



I. Subsidiary Information
  Item 11.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
  Foreign Exchange Risk
    105




---



##### Table of Contents



Item 12.
    
    Description of Securities Other than Equity Securities
 A. Debt Securities
  B. Warrants and Rights
  C. Other Securities
  D. American Depositary Shares
 Fees and Charges
  Service
    
    Fees
    
    Issuance of ADSs
    
    Up to U.S. 5¢ per ADS issued
    
    Cancellation of ADSs
    
    Up to U.S. 5¢ per ADS canceled
    
    Distribution of cash
dividends or other cash
distributions
    
    Up to U.S. 5¢ per ADS held
    
    Distribution of ADSs
pursuant to stock dividends, free stock distributions or exercise of
rights
    
    Up to U.S. 5¢ per ADS held
    
    Distribution of securities
other than ADSs or rights to
purchase additional ADSs
    
    Up to U.S. 5¢ per ADS held
    
    Depositary Services
    
    Up to U.S. 5¢ per ADS held on the
applicable record date(s) established
by the Depositary
    
    Transfer of ADRs
    
    U.S. $1.50 per certificate presented
for transfer
  
    
    fees for the transfer and registration of ordinary shares charged by the registrar and
transfer agent for the ordinary shares in the Cayman Islands ( i.e., upon deposit and
withdrawal of ordinary shares);
 106




---



##### Table of Contents




    
    expenses incurred for converting foreign currency into U.S. dollars;
 
    
    expenses for cable, telex and fax transmissions and for delivery of securities;
 
    
    taxes and duties upon the transfer of securities ( i.e., when ordinary shares are
deposited or withdrawn from deposit); and
 
    
    fees and expenses incurred in connection with the delivery or servicing of ordinary
shares on deposit.
  i.e.
    107




---



##### Table of Contents



PART II
 Item 13.
    
    Defaults, Dividend Arrearages and Delinquencies
  Item 14.
    
    Material Modifications to the Rights of Security Holders and Use of Proceeds
  Item 15.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Managements Annual Report on Internal Control over Financial Reporting
  Changes in Internal Control over Financial Reporting
  108




---



##### Table of Contents




    
    we implemented policies and systems to prevent internal transfer of inventory among
individual restaurants;
 
    
    we reduced the number of related party transactions and established policies and
systems governing related party transactions and the proper recording of such
transactions;
 
    
    we implemented a new POS system and revised existing internal policies regarding
fixed assets; and
 
    
    we hired new financial personnel increased training regarding U.S. GAAP.
 Item 16.
    
    [Reserved]
 Item 16A.
    
    Audit Committee Financial Expert
  Item 16B.
    
    Code of Ethics
  Item 16C.
    
    Principal Accountant Fees and Services
  2009
    
    2010Audit fees (1)
    
    
    304
    
    
    
    5,504Audit-related fees
    
    
    
    
    
    
    
 
 (1)
    
    Audit fees means the aggregate fees billed in each of the fiscal years listed for
professional services rendered by our principal auditors for the audit of our annual financial
statements. In 2009 and 2010, the audit refers to integrated audit, including financial audit
and audit pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.  109




---



##### Table of Contents



Item 16D.
    
    Exemptions from the Listing Standards for Audit Committees
  Item 16E.
    
    Purchases of Equity Securities by the Issuer and Affiliated Purchasers
  Item 16F.
    
    Change in Registrants Certifying Accountant
  Item 16G.
    
    Corporate Governance
  110




---



##### Table of Contents



Item 17.
    
    Financial Statements
  Item 18.
    
    Financial Statements
  Item 19.
    
    Exhibits
 Exhibit Number
    
    Description of Document1.1
    
    Second Amended and Restated Memorandum of Association of
the Registrant (incorporated by reference to Exhibit 4.2 of
Form F-1 (file no. 333-169248) furnished to the Securities
and Exchange Commission on September 7, 2010)2.1
    
    Registrants Specimen Certificate for Ordinary Shares
(incorporated by reference to Exhibit 4.1 to our Amendment
to Form F-1 Registration Statement (file no. 333-169248)
filed with the Securities and Exchange Commission on
September 14, 2010)2.2*
    
    Deposit Agreement among the Registrant, the depositary and
holder of the American Depositary Receipts2.3
    
    Registrants Specimen American Depositary Receipt
(incorporated by reference to Exhibit 4.4 to our Amendment
to Form F-1 Registration Statement (file no. 333-169248)
filed with the Securities and Exchange Commission on
September 14, 2010)4.1
    
    2009 Share Incentive Plan (incorporated by reference to
Exhibit 10.1 of Form F-1 (file no. 333-169248) furnished to
the Securities and Exchange Commission on September 7,
2010)4.2
    
    Form of Indemnification Agreement with the Registrants
directors and officers (incorporated by reference to
Exhibit 10.2 of Form F-1 (file no. 333-169248) furnished to
the Securities and Exchange Commission on September 7,
2010)4.3
    
    Form of Employment Agreement with the Registrants officers
(incorporated by reference to Exhibit 10.2 of Form F-1
(file no. 333- 169248) furnished to the Securities and
Exchange Commission on September 7, 2010)8.1*
    
    List of Subsidiaries11.1
    
    Code of Business Conduct and Ethics (incorporated by
reference to Exhibit 99.1 of our Registration Statement on
Form F-1 (file no. 333-169248) filed with the Securities
and Exchange Commission on September 7, 2010)12.1*
    
    Certification by Principal Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200212.2*
    
    Certification by Principal Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 200213.1*
    
    Certification by Principal Executive Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
 111




---



##### Table of Contents



Exhibit Number
    
    Description of Document13.2*
    
    Certification by Principal Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 200215.1*
    
    Consent of Maples and Calder15.2*
    
    Consent of Jingtian & Gongcheng15.3*
    
    Consent of Deloitte Touche Tohmatsu, CPA Ltd.
 
 *
    
    Filed herewith 112




---



##### Table of Contents



SIGNATURES
  Country Style Cooking Restaurant Chain Co., Ltd.By:
    /s/ Hong LiName:
    Hong LiTitle:
    Chairman and Chief Executive Officer




---



##### Table of Contents



COUNTRY STYLE COOKING RESTAURANT CHAIN CO., LTD.
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of December 31, 2009 and 2010
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2008, 2009 and 2010
    
    F-4Consolidated Statements of Changes in Equity (Deficit) and Comprehensive Income for the
Years Ended December 31, 2008, 2009 and 2010
    
    F-5Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2009 and 2010
    
    F-6Notes to the Consolidated Financial Statements
    
    F-7Financial Statement Schedule I  Condensed Financial Information of Parent Company
    
    F-24
 F-1




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
 F-2




---



##### Table of Contents



COUNTRY STYLE COOKING RESTAURANT CHAIN CO., LTD.
 
 CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2009 AND 2010
 December 312009
    
    
    2010
    
    
    2010(In thousands of RMB except
    
    
    US$ 000sshare and per share amounts)
    
    
    (Note 2)ASSETSCurrent assets:Cash and cash equivalents
    
    
    70,695
    
    
    
    612,583
    
    
    
    92,816Due from related parties
    
    
    9,012
    
    
    
    100
    
    
    
    15Inventories
    
    
    14,929
    
    
    
    24,951
    
    
    
    3,780Prepaid rent
    
    
    3,857
    
    
    
    6,569
    
    
    
    995Prepaid expenses and other current assets
    
    
    6,902
    
    
    
    16,889
    
    
    
    2,559Deferred income taxescurrent
    
    
    518
    
    
    
    639
    
    
    
    97Total current assets
    
    
    105,913
    
    
    
    661,731
    
    
    
    100,262Property and equipment, net
    
    
    95,961
    
    
    
    188,699
    
    
    
    28,591Goodwill
    
    
    6,286
    
    
    
    6,286
    
    
    
    952Deferred income taxesnon current
    
    
    959
    
    
    
    3,067
    
    
    
    465Deposits for leases
    
    
    5,949
    
    
    
    10,020
    
    
    
    1,518Total assets
    
    
    215,068
    
    
    
    869,803
    
    
    
    131,788LIABILITIES, MEZZANINE EQUITY AND EQUITYCurrent liabilities:Accounts payable
    
    
    31,306
    
    
    
    34,204
    
    
    
    5,182Deferred revenue
    
    
    1,257
    
    
    
    2,824
    
    
    
    428Due to related parties
    
    
    11,031
    
    
    
    560
    
    
    
    85Accrued payroll
    
    
    9,889
    
    
    
    15,292
    
    
    
    2,317Income taxes payable
    
    
    7,691
    
    
    
    6,526
    
    
    
    989Dividend payable
    
    
    3,946
    
    
    
    
    
    
    
    Other current liabilities
    
    
    17,073
    
    
    
    31,013
    
    
    
    4,697Total current liabilities
    
    
    82,193
    
    
    
    90,419
    
    
    
    13,698Deferred rentnon current
    
    
    5,108
    
    
    
    8,871
    
    
    
    1,344Prepaid subscription
    
    
    
    
    
    
    678
    
    
    
    103Advance receipts from depositary bank
    
    
    
    
    
    
    3,743
    
    
    
    567Total liabilities
    
    
    87,301
    
    
    
    103,711
    
    
    
    15,712Mezzanine equity:Series A convertible preferred shares, par
value $0.001, 24,000,000 shares issued and
outstanding as of December 31, 2009
    
    
    96,949
    
    
    
    
    
    
    
    Equity:Ordinary shares, par value $0.001, 96,000,000
and 1,000,000,000 shares authorized as of
December 31, 2009 and 2010, respectively,
56,000,000 and 103,080,000 shares issued and
outstanding as of December 31, 2009 and 2010,
respectively
    
    
    420
    
    
    
    736
    
    
    
    112Additional paid in capital
    
    
    5,866
    
    
    
    682,577
    
    
    
    103,421Retained earnings
    
    
    26,572
    
    
    
    89,382
    
    
    
    13,543Accumulated other comprehensive loss
    
    
    (2,040
    )
    
    
    (6,603
    )
    
    
    (1,000
    )Total equity
    
    
    30,818
    
    
    
    766,092
    
    
    
    116,076Total liabilities, mezzanine equity and equity
    
    
    215,068
    
    
    
    869,803
    
    
    
    131,788
  F-3




---



##### Table of Contents



COUNTRY STYLE COOKING RESTAURANT CHAIN CO., LTD.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 2008
    
    
    2009
    
    
    2010
    
    
    2010(In thousands of RMB except
    
    
    US$ 000sshare and per share amounts)
    
    
    (Note 2)Revenue  restaurant sales
    
    
    231,463
    
    
    
    494,459
    
    
    
    745,939
    
    
    
    113,021Costs and expenses:Restaurant expenses:Food and paper
    
    
    115,071
    
    
    
    239,357
    
    
    
    351,422
    
    
    
    53,246Restaurant wages and related expenses
    
    
    33,076
    
    
    
    76,890
    
    
    
    119,052
    
    
    
    18,038Restaurant rent expense
    
    
    17,945
    
    
    
    38,546
    
    
    
    64,284
    
    
    
    9,740Restaurant utilities expense
    
    
    13,773
    
    
    
    31,073
    
    
    
    46,746
    
    
    
    7,083Pre-opening expenses
    
    
    
    
    
    
    
    
    
    
    5,906
    
    
    
    895Other restaurant operating expenses
    
    
    12,455
    
    
    
    28,774
    
    
    
    33,106
    
    
    
    5,016Selling, general and administrative
    
    
    3,955
    
    
    
    13,360
    
    
    
    32,330
    
    
    
    4,898Depreciation
    
    
    2,855
    
    
    
    10,999
    
    
    
    21,288
    
    
    
    3,225Impairment and other lease charges
    
    
    
    
    
    
    
    
    
    
    2,087
    
    
    
    316Total operating expenses
    
    
    199,130
    
    
    
    438,999
    
    
    
    676,221
    
    
    
    102,457Income from operations
    
    
    32,333
    
    
    
    55,460
    
    
    
    69,718
    
    
    
    10,564Interest income
    
    
    1,083
    
    
    
    758
    
    
    
    3,465
    
    
    
    525Foreign exchange gain (loss)
    
    
    (1,347
    )
    
    
    3
    
    
    
    (2,715
    )
    
    
    (411
    )Other income (loss)
    
    
    (12
    )
    
    
    490
    
    
    
    6,893
    
    
    
    1,044Income before income taxes
    
    
    32,057
    
    
    
    56,711
    
    
    
    77,361
    
    
    
    11,722Income tax expenses
    
    
    (5,440
    )
    
    
    (11,632
    )
    
    
    (14,551
    )
    
    
    (2,205
    )Net income
    
    
    26,617
    
    
    
    45,079
    
    
    
    62,810
    
    
    
    9,517Dividend on Series A convertible preferred shares
    
    
    
    
    
    
    (3,946
    )
    
    
    
    
    
    
    Distribution to Founders
    
    
    (2,436
    )
    
    
    (3,454
    )
    
    
    
    
    
    
    Net income attributable to ordinary shareholders
    
    
    24,181
    
    
    
    37,679
    
    
    
    62,810
    
    
    
    9,517Basic net income per share
    
    
    0.30
    
    
    
    0.47
    
    
    
    0.73
    
    
    
    0.11Diluted net income per share
    
    
    0.30
    
    
    
    0.47
    
    
    
    0.71
    
    
    
    0.11Basic weighted average ordinary shares outstanding
    
    
    56,000,000
    
    
    
    56,000,000
    
    
    
    68,124,712
    
    
    
    68,124,712Diluted weighted average ordinary shares outstanding
    
    
    80,000,000
    
    
    
    80,000,000
    
    
    
    70,503,794
    
    
    
    70,503,794
  F-4




---



##### Table of Contents



COUNTRY STYLE COOKING RESTAURANT CHAIN CO., LTD.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT)
AND

COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 Retained
    
    
    AccumulatedAdditional
    
    
    Earnings
    
    
    OtherOrdinary Shares
    
    
    Paid in
    
    
    (Accumulated
    
    
    Comprehensive
    
    
    Total Equity
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit)
    
    
    Loss
    
    
    (Deficit)
    
    
    Income(In thousands of RMB except share amounts)Balance at January
1, 2008
    
    
    56,000,000
    
    
    
    420
    
    
    
    5,866
    
    
    
    (35,288
    )
    
    
    (1,643
    )
    
    
    (30,645
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,617
    
    
    
    
    
    
    
    26,617
    
    
    
    26,617Distribution to Founders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,436
    )
    
    
    
    
    
    
    (2,436
    )Foreign currency
translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (394
    )
    
    
    (394
    )
    
    
    (394
    )Balance at December 31,
2008
    
    
    56,000,000
    
    
    
    420
    
    
    
    5,866
    
    
    
    (11,107
    )
    
    
    (2,037
    )
    
    
    (6,858
    )
    
    
    26,223Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,079
    
    
    
    
    
    
    
    45,079
    
    
    
    45,079Distribution to Founders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,454
    )
    
    
    
    
    
    
    (3,454
    )Dividend declared on
Series A convertible
preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,946
    )
    
    
    
    
    
    
    (3,946
    )Foreign currency
translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )
    
    
    (3
    )Balance at December 31,
2009
    
    
    56,000,000
    
    
    
    420
    
    
    
    5,866
    
    
    
    26,572
    
    
    
    (2,040
    )
    
    
    30,818
    
    
    
    45,076Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,810
    
    
    
    
    
    
    
    62,810
    
    
    
    62,810Conversion of Series A
convertible preferred
shares
    
    
    24,000,000
    
    
    
    161
    
    
    
    96,788
    
    
    
    
    
    
    
    
    
    
    
    96,949Issuance of ordinary
shares upon completion
of initial public
offering
    
    
    23,000,000
    
    
    
    154
    
    
    
    573,666
    
    
    
    
    
    
    
    
    
    
    
    573,820Issuance of ordinary
shares upon exercise of
options
    
    
    80,000
    
    
    
    1
    
    
    
    537
    
    
    
    
    
    
    
    
    
    
    
    538Share-based
compensation
    
    
    
    
    
    
    
    
    
    
    5,720
    
    
    
    
    
    
    
    
    
    
    
    5,720Foreign currency
translation adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,563
    )
    
    
    (4,563
    )
    
    
    (4,563
    )Balance at December 31,
2010
    
    
    103,080,000
    
    
    
    736
    
    
    
    682,577
    
    
    
    89,382
    
    
    
    (6,603
    )
    
    
    766,092
    
    
    
    58,247
  F-5




---



##### Table of Contents



COUNTRY STYLE COOKING RESTAURANT CHAIN CO., LTD.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
 2008
    
    
    2009
    
    
    2010
    
    
    2010(In thousands of RMB)
    
    
    US$ 000s(Note 2)Cash flows provided from operating activities:Net income
    
    
    26,617
    
    
    
    45,079
    
    
    
    62,810
    
    
    
    9,517Adjustments to reconcile net income to net cash provided from operating activities:Loss on disposals of property and equipment
    
    
    4
    
    
    
    180
    
    
    
    358
    
    
    
    54Impairment and other lease charges
    
    
    
    
    
    
    
    
    
    
    2,087
    
    
    
    316Depreciation
    
    
    2,855
    
    
    
    10,999
    
    
    
    21,288
    
    
    
    3,225Deferred income taxes
    
    
    (552
    )
    
    
    (925
    )
    
    
    (2,046
    )
    
    
    (310
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    5,720
    
    
    
    867Changes in other operating assets and liabilities:Due from related parties
    
    
    (9,567
    )
    
    
    851
    
    
    
    8,912
    
    
    
    1,350Inventories
    
    
    (6,093
    )
    
    
    (8,382
    )
    
    
    (10,022
    )
    
    
    (1,518
    )Prepaid rent
    
    
    (1,890
    )
    
    
    (1,967
    )
    
    
    (2,712
    )
    
    
    (411
    )Prepaid expense and other current assets
    
    
    (2,328
    )
    
    
    (3,756
    )
    
    
    (9,987
    )
    
    
    (1,513
    )Deposits for leases
    
    
    (2,172
    )
    
    
    (3,777
    )
    
    
    (4,071
    )
    
    
    (617
    )Accounts payable
    
    
    12,546
    
    
    
    18,760
    
    
    
    2,898
    
    
    
    439Deferred revenue
    
    
    103
    
    
    
    1,154
    
    
    
    1,567
    
    
    
    237Due to related parties
    
    
    (2,707
    )
    
    
    (1,806
    )
    
    
    355
    
    
    
    54Accrued payroll
    
    
    4,761
    
    
    
    5,102
    
    
    
    5,403
    
    
    
    819Income taxes payable
    
    
    4,078
    
    
    
    3,272
    
    
    
    (1,165
    )
    
    
    (177
    )Deferred rent
    
    
    2,166
    
    
    
    3,360
    
    
    
    3,763
    
    
    
    570Other liabilities
    
    
    11,718
    
    
    
    4,025
    
    
    
    4,640
    
    
    
    705Net cash provided by operating activities
    
    
    39,539
    
    
    
    72,169
    
    
    
    89,798
    
    
    
    13,607Cash flows used in investing activities:Capital expenditures:Restaurant and office space capital expenditures
    
    
    (40,662
    )
    
    
    (45,820
    )
    
    
    (116,792
    )
    
    
    (17,696
    )Purchase of restaurant operating assets
    
    
    (3,242
    )
    
    
    (4,575
    )
    
    
    
    
    
    
    Net cash used in investing activities
    
    
    (43,904
    )
    
    
    (50,395
    )
    
    
    (116,792
    )
    
    
    (17,696
    )Cash flows (used in) provided by financing activities:Distribution to Founders
    
    
    (2,436
    )
    
    
    (3,454
    )
    
    
    
    
    
    
    Dividend paid to Series A convertible preferred shares
    
    
    
    
    
    
    
    
    
    
    (3,946
    )
    
    
    (598
    )Proceeds from early exercise of employee stock options
    
    
    
    
    
    
    
    
    
    
    2,833
    
    
    
    429Gross IPO proceeds
    
    
    
    
    
    
    
    
    
    
    589,672
    
    
    
    89,344Offering expense
    
    
    
    
    
    
    
    
    
    
    (16,905
    )
    
    
    (2,561
    )Net cash (used for) provided by financing activities:
    
    
    (2,436
    )
    
    
    (3,454
    )
    
    
    571,654
    
    
    
    86,614Effect of exchange rate on cash and cash equivalents
    
    
    (394
    )
    
    
    (3
    )
    
    
    (2,772
    )
    
    
    (420
    )Net increase (decrease) in cash and cash equivalents
    
    
    (7,195
    )
    
    
    18,317
    
    
    
    541,888
    
    
    
    82,105Cash and cash equivalents, beginning of year
    
    
    59,573
    
    
    
    52,378
    
    
    
    70,695
    
    
    
    10,711Cash and cash equivalents, end of year
    
    
    52,378
    
    
    
    70,695
    
    
    
    612,583
    
    
    
    92,816Supplemental disclosure of cash flow information:Income taxes paid
    
    
    1,892
    
    
    
    9,264
    
    
    
    17,762
    
    
    
    2,691Supplemental schedule of non-cash investing and financing activities:Payable for purchase of property and equipment
    
    
    3,911
    
    
    
    13,490
    
    
    
    12,317
    
    
    
    1,866Payable of offering expenses
    
    
    
    
    
    
    
    
    
    
    891
    
    
    
    135
  F-6




---



##### Table of Contents



COUNTRY STYLE COOKING RESTAURANT CHAIN CO., LTD.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010
(in thousands, except share and per share amounts)
 1. Organization and Principal Activities
     PercentagePlace of Incorporation
    
    Date of Incorporation
    
    of Ownership (%)Country Style Cooking International Restaurant Chain Group Ltd.
    
    Hong Kong
    
    August 23, 2007
    
    
    100Country Style Cooking (Chongqing) Investment Co., Ltd.
    
    Chongqing, PRC
    
    September 24, 2007
    
    
    100Chongqing Xinghong Growing Rich Management Co., Ltd.
    
    Chongqing, PRC
    
    March 25, 2008
    
    
    100Sichuan Country Style Cooking Restaurant Co., Ltd.
    
    Chengdu, PRC
    
    October 4, 2008
    
    
    100Xian Country Style Cooking Restaurant Co., Ltd.
    
    Xian, PRC
    
    May 19, 2008
    
    
    100Changsha Country Style Cooking Restaurant Co., Ltd.
    
    Changsha, PRC
    
    October 4, 2009
    
    
    100Shanghai Growing Rich Country Style Cooking Restaurant Co., Ltd.
    
    Shanghai, PRC
    
    September 1, 2009
    
    
    100Wuhan Country Style Cooking Restaurant Co., Ltd.
    
    Wuhan, PRC
    
    December 21, 2009
    
    
    100Guizhou Country Style Cooking Restaurant Co., Ltd.
    
    Guizhou, PRC
    
    September 26, 2010
    
    
    100
 2. Summary of Significant Accounting Policies
 Use of Estimates.
 F-7




---



##### Table of Contents



Foreign Currency Translation.
   Reclassifications.
 Cash and Cash Equivalents.
 Inventories.
 Property and Equipment.
 Buildings
    
    20 yearsEquipment
    
    3 to 5 yearsOffice furniture and fixtures
    
    3 to 5 yearsLeasehold improvements
    
    Shorter of estimated useful life of 5 years or lease term
  Business Combinations.
  F-8




---



##### Table of Contents



Goodwill.
  Impairment of Long-Lived Assets.
 Leases.
 Revenue Recognition.
 Income Taxes.
 Pre-opening expenses.
 F-9




---



##### Table of Contents



Fair Value of Financial Instruments.
 Net Income per Share.
 Segment Reporting.
 Comprehensive Income.
 Deferred Revenue and Sales Coupon.
  Related Parties.
 Government Grants.
 Translation into United States Dollars.
 F-10




---



##### Table of Contents



Recent Accounting Pronouncements.
     F-11




---



##### Table of Contents



3. Property and Equipment, Net
  December 31,2009
    
    
    2010RMBCost:Buildings
    
    
    32,875
    
    
    
    52,321Leasehold improvements
    
    
    30,238
    
    
    
    66,164Equipment
    
    
    33,660
    
    
    
    64,132Office furniture and fixtures
    
    
    4,420
    
    
    
    9,120Less: accumulated depreciation
    
    
    (12,847
    )
    
    
    (33,362
    )Construction in progress:
    
    
    7,615
    
    
    
    30,32495,961
    
    
    
    188,699
  4. Purchases of Restaurant Operating Assets
   2008
    
    
    2009RMBTotal consideration
    
    
    12,078
    
    
    
    3,401Fair value of identifiable assets acquired
    
    
    7,200
    
    
    
    1,993Goodwill
    
    
    4,878
    
    
    
    1,408
  5. Impairment of Long-Lived Assets and Other Lease Charges
  F-12




---



##### Table of Contents



6. Other Current Liabilities
 December 31,2009
    
    
    2010RMBCapital expenditure liability
    
    
    1,486
    
    
    
    12,317Security deposit
    
    
    2,000
    
    
    
    Accrued utility costs
    
    
    2,291
    
    
    
    3,976Other tax payable
    
    
    7,214
    
    
    
    6,639Accrued professional fees
    
    
    2,204
    
    
    
    1,742Advance receipts from depositary bank
    
    
    
    
    
    
    436Other
    
    
    1,878
    
    
    
    5,90317,073
    
    
    
    31,013
 7. Leases
    Years Ending December 31,
    
    RMB2011
    
    
    70,3192012
    
    
    68,2222013
    
    
    64,2282014
    
    
    60,3022015
    
    
    52,851Thereafter
    
    
    114,533Total minimum lease payments
    
    
    430,455
  For Years EndedDecember 31,2008
    
    
    2009
    
    
    2010RMBMinimum rent on real property
    
    
    16,169
    
    
    
    36,381
    
    
    
    62,579Contingent rent
    
    
    1,776
    
    
    
    2,165
    
    
    
    2,790Total
    
    
    17,945
    
    
    
    38,546
    
    
    
    65,369
 F-13




---



##### Table of Contents



8. Income Taxes
 Cayman Islands
  Hong Kong
  The PRC
  F-14




---



##### Table of Contents



Year Ended December 31,2008
    
    2009
    
    2010RMBCurrent
    
    
    (5,992
    )
    
    
    (12,557
    )
    
    
    (16,597
    )Deferred
    
    
    825
    
    
    
    2,638
    
    
    
    5,462Change in valuation allowance
    
    
    (273
    )
    
    
    (1,713
    )
    
    
    (3,416
    )Total
    
    
    (5,440
    )
    
    
    (11,632
    )
    
    
    (14,551
    )
 F-15




---



##### Table of Contents



December 31,2009
    
    2010RMBDeferred tax assets:Net operating loss carryforward
    
    
    1,673
    
    
    
    4,829Deferred rent
    
    
    1,273
    
    
    
    2,842Accrued expense
    
    
    462
    
    
    
    994Other
    
    
    55
    
    
    
    443Valuation allowance
    
    
    (1,986
    )
    
    
    (5,402
    )Total deferred tax assets
    
    
    1,477
    
    
    
    3,706Deferred tax assets are analyzed as:Current
    
    
    518
    
    
    
    639Non-current
    
    
    959
    
    
    
    3,067Total deferred tax assets
    
    
    1,477
    
    
    
    3,706Deferred tax liabilities:Foreign-currency forward exchange contracts
    
    
    
    
    
    
    (183
    )Total deferred tax liabilitiescurrent
    
    
    
    
    
    
    (183
    )
   
    
    Future reversals of existing taxable temporary differences;
 
    
    Further taxable income exclusive of reversing temporary differences and carryforwards;
 
    
    Future taxable income arising from implementing tax planning strategies.
   2008
    
    2009
    
    2010PRC statutory tax rate
    
    
    25.0
    %
    
    
    25.0
    %
    
    
    25.0
    %Effect of different tax rate of Group entities operating in other jurisdictions or under different tax status
    
    
    (3.2
    )%
    
    
    2.8
    %
    
    
    1.3
    %Tax effect of non-deductible expenses, net
    
    
    1.0
    %
    
    
    0.4
    %
    
    
    (0.3
    )%Effect of tax holidays
    
    
    (6.5
    )%
    
    
    (11.9
    )%
    
    
    (11.7
    )%Withholding tax on dividends
    
    
    
    
    
    
    1.2
    %
    
    
    Effect of change in valuation allowance
    
    
    0.9
    %
    
    
    3.0
    %
    
    
    4.4
    %Others
    
    
    (0.2
    )%
    
    
    
    
    
    
    0.1
    %Effective EIT rate
    
    
    17.0
    %
    
    
    20.5
    %
    
    
    18.8
    %
 F-16




---



##### Table of Contents



2008
    
    2009
    
    2010RMB except pershare amountsThe aggregate dollar effect
    
    
    2,068
    
    
    
    6,730
    
    
    
    9,031Per share effect  basic
    
    
    0.03
    
    
    
    0.08
    
    
    
    0.11Per share effect  diluted
    
    
    0.03
    
    
    
    0.08
    
    
    
    0.10
 9. Related Party Transactions and Balances
  2009
    
    2010RMBRelated party balancesAmounts due from related parties Shareholders and key management personnel
    
    
    9,012
    
    
    
    100Amounts due to related parties Shareholders and key management personnel
    
    
    11,031
    
    
    
    560
  10. Preferred shares
   Conversion
   F-17




---



##### Table of Contents



Voting right
  Dividend
  Liquidation Preference
  Drag-along Rights
   11. Mainland China Contribution Plan And Profit Appropriation
  F-18




---



##### Table of Contents



12. Restricted Net Assets
  13. Dividend and Distributions
   14. Net Income Per Share
  F-19




---



##### Table of Contents



Year Ended December 31,2008
    
    2009
    
    2010RMB except share amountsBasic net income per share:Consolidated net income
    
    
    26,617
    
    
    
    45,079
    
    
    
    62,810Less: Distribution to Founders
    
    
    (2,436
    )
    
    
    (3,454
    )
    
    
    Dividend on Series A convertible preferred shares
    
    
    
    
    
    
    (3,946
    )
    
    
    Amounts allocated to preferred shares for participating rights to dividends
    
    
    (7,254
    )
    
    
    (11,303
    )
    
    
    (12,987
    )Net income attributable to ordinary shareholders  basic
    
    
    16,927
    
    
    
    26,376
    
    
    
    49,823Weighted average ordinary shares outstanding  basic
    
    
    56,000,000
    
    
    
    56,000,000
    
    
    
    68,124,712Net income per share  basic
    
    
    0.30
    
    
    
    0.47
    
    
    
    0.73Diluted net income per share:Net income attributable to ordinary shareholders  basic
    
    
    16,927
    
    
    
    26,376
    
    
    
    49,823Amounts allocated to preferred shares for participating rights to dividend
    
    
    7,254
    
    
    
    11,303
    
    
    
    Net income attributable to ordinary shareholders  diluted
    
    
    24,181
    
    
    
    37,679
    
    
    
    49,823Weighted average ordinary shares outstanding  basic
    
    
    56,000,000
    
    
    
    56,000,000
    
    
    
    68,124,712Preferred shares
    
    
    24,000,000
    
    
    
    24,000,000
    
    
    
    Options
    
    
    
    
    
    
    
    
    
    
    2,379,082Weighted average ordinary shares outstanding  diluted
    
    
    80,000,000
    
    
    
    80,000,000
    
    
    
    70,503,794Net income per share  diluted
    
    
    0.30
    
    
    
    0.47
    
    
    
    0.71
  15. Share based compensation
    Restaurant wages and related expenses
    
    
    1,498Selling, general and administrative
    
    
    4,222Total
    
    
    5,720
  F-20




---



##### Table of Contents



2010Suboptimal exercise factor
    
    
    2.5Risk-free interest rate
    
    3.50% to 4.60%Volatility
    
    43.10% to 46.73%Dividend yield
    
    
    Life of option
    
    10 years
  WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateNumber of
    
    Exercise
    
    Contractual
    
    IntrinsicOptions
    
    Price
    
    Term
    
    Value of OptionsUS$
    
    
    
    
    
    US$Outstanding, as of January 1, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Granted
    
    
    4,455,000
    
    
    
    1.14
    
    
    
    
    
    
    
    Early exercise of options
    
    
    (345,000
    )
    
    
    1.23
    
    
    
    
    
    
    
    Cancellation and termination
    
    
    (163,800
    )
    
    
    1.00
    
    
    
    
    
    
    
    Outstanding, as of December 31, 2010
    
    
    3,946,200
    
    
    
    1.14
    
    
    9.1 years
    
    
    18,182Vested and expected to vest as of
December 31, 2010
    
    
    2,886,514
    
    
    
    1.19
    
    
    9.2 years
    
    
    13,148
    Weighted-Average GrantDateFair ValueUS$Non-vested restricted shares outstanding at January 1, 2010
    
    
    
    
    
    
    Granted
    
    
    288,000
    
    
    
    2.10Issued through early exercise of options
    
    
    345,000
    
    
    
    0.92Vested
    
    
    (80,000
    )
    
    
    2.90Cancellation and termination
    
    
    (8,000
    )
    
    
    0.90Non-vested restricted shares outstanding at December 31, 2010
    
    
    545,000
    
    
    
    1.43
   F-21




---



##### Table of Contents



16. Subsequent Events
  F-22




---



##### Table of Contents



COUNTRY STYLE COOKING RESTAURANT CHAIN CO., LTD.
 
 SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF COUNTRY STYLE
COOKING RESTAURANT CHAIN CO.,LTD
(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
 December 31,2009
    
    2010(In thousands of RMBexcept share and pershare amounts)ASSETSCash and cash equivalents
    
    
    100
    
    
    
    241Due from subsidiaries
    
    
    29
    
    
    
    32,185Prepaid expenses and other current assets
    
    
    1,900
    
    
    
    3,991Investment in subsidiaries
    
    
    132,166
    
    
    
    746,124Total assets
    
    
    134,195
    
    
    
    782,541LIABILITIES, MEZZANINE EQUITY AND EQUITYDue to subsidiaries
    
    
    176
    
    
    
    8,322Prepaid subscription
    
    
    
    
    
    
    2,229Accrued expenses
    
    
    2,306
    
    
    
    5,070Dividend payable
    
    
    3,946
    
    
    
    Total liabilities
    
    
    6,428
    
    
    
    15,621Mezzanine Equity:Series A convertible preferred shares, par value $0.001 24,000,000 shares issued and outstanding
    
    
    96,949
    
    
    
    Equity:Ordinary shares, par value $.001, 96,000,000 and 1,000,000,000 shares authorized, respectively,
56,000,000 and 103,032,000 shares issued and outstanding, respectively
    
    
    420
    
    
    
    736Additional paid-in capital
    
    
    5,866
    
    
    
    682,577Retained earnings
    
    
    26,572
    
    
    
    89,382Accumulated other comprehensive loss
    
    
    (2,040
    )
    
    
    (5,775
    )Total equity
    
    
    30,818
    
    
    
    766,920Total liabilities, mezzanine equity and equity
    
    
    134,195
    
    
    
    782,541
 F-23




---



##### Table of Contents



COUNTRY STYLE COOKING RESTAURANT CHAIN CO., LTD.
 SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF COUNTRY STYLE
COOKING RESTAURANT CHAIN CO, LTD.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF OPERATIONS
 Year Ended December 31,2008
    
    2009
    
    2010(In thousands of RMB)Operating costs and expenses
    
    
    (369
    )
    
    
    (120
    )
    
    
    (6,441
    )Loss from operations
    
    
    (369
    )
    
    
    (120
    )
    
    
    (6,441
    )Other income (expense)
    
    
    235
    
    
    
    3
    
    
    
    1,899Investment income from subsidiaries
    
    
    24,315
    
    
    
    41,742
    
    
    
    67,352Net income attributable to Country Style Cooking Restaurant Chain Co., Ltd.
    
    
    24,181
    
    
    
    41,625
    
    
    
    62,810Dividend on Series A convertible preferred shares
    
    
    
    
    
    
    (3,946
    )
    
    
    Net income attributable to ordinary shareholders
    
    
    24,181
    
    
    
    37,679
    
    
    
    62,810
 F-24




---



##### Table of Contents



COUNTRY STYLE COOKING RESTAURANT CHAIN CO., LTD.
 SCHEDULE I  CONDENSED FINANCIAL INFORMATION OF COUNTRY STYLE
COOKING RESTAURANT CHAIN CO, LTD.
(PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF OPERATIONS
 Year Ended December 31,2008
    
    2009
    
    2010(In thousands of RMB)Cash flows from operating activities:Net income attributable to Country Style Cooking Restaurant Chain Co., Ltd.
    
    
    24,181
    
    
    
    41,625
    
    
    
    62,810Investment income from subsidiaries
    
    
    (24,315
    )
    
    
    (41,742
    )
    
    
    (67,352
    )Adjustments to reconcile net income to net cash used in operating activities:Share-based compensation
    
    
    
    
    
    
    
    
    
    
    5,720Increase in due from subsidiaries
    
    
    (19
    )
    
    
    (10
    )
    
    
    (32,156
    )Increase in due to subsidiaries
    
    
    176
    
    
    
    
    
    
    
    8,146Increase in prepaid expenses and other current assets
    
    
    
    
    
    
    (1,900
    )
    
    
    (2,091
    )Decrease in accrued liability
    
    
    (362
    )
    
    
    2,000
    
    
    
    1,874Net cash used in operating activities
    
    
    (339
    )
    
    
    (27
    )
    
    
    (23,049
    )Cash flows from investing activities:Investment in subsidiaries
    
    
    (58,057
    )
    
    
    
    
    
    
    (546,606
    )Net cash used in investing activities
    
    
    (58,057
    )
    
    
    
    
    
    
    (546,606
    )Cash flows from financing activities:Dividend paid to Series A
    
    
    
    
    
    
    
    
    
    
    (3,946
    )Proceeds from early exercise of employee stock options
    
    
    
    
    
    
    
    
    
    
    2,833IPO proceeds, net of offering expense 16,905
    
    
    
    
    
    
    
    
    
    
    572,767Net cash provided by financing activities
    
    
    
    
    
    
    
    
    
    
    571,654Effect of exchange rate change
    
    
    (394
    )
    
    
    (3
    )
    
    
    (1,858
    )Net increase (decrease) in cash and cash equivalents
    
    
    (58,790
    )
    
    
    (30
    )
    
    
    141Cash and cash equivalents, beginning of year
    
    
    58,920
    
    
    
    130
    
    
    
    100Cash and cash equivalents, end of year
    
    
    130
    
    
    
    100
    
    
    
    241
 Note to Schedule I
    F-25